What is REIT?

REIT is simply an investment vehicle that allows us to invest via stock exchange and gain instant exposure to various properties held under the REIT.  There are 17 REITs which are listed in Bursa Malaysia.

REITs can be categorized into Retail REIT, Office REIT, Healthcare REIT, Hotel and Resort REIT, Industrial REIT and many more. For example, if you want to earn rental income from hospitals, Al-Aqar Healthcare REIT allows you to earn rental income from certain KPJ hospitals in Malaysia such as Damai Hospital in Sabah, KPJ Ampang Puteri, KPJ Penang and many more.

Besides, If you have been to Tanjong Jara Resort in Terengganu, you will be delighted that it is a nice private resort with beautiful and white sandy beach facing South China Sea! You might also be delighted that this particular resort is one of the properties owned by a REIT called YTL Hospitality REIT of which we could potentially invest into!

Source: www.iatemywaythrough.com 

In terms of REIT structure, there are 3 parties generally speaking.

Firstly, REIT manager is responsible to enhance the value of the properties, identifying potential property to be acquired by the REIT, adopt and maintain debt level of the REIT and etc. 

Secondly, property manager provides property management services such as ensuring properties are in clean condition and etc. Lastly, trustee provides check and balance to the REIT to ensure that the REIT is managed according  to REIT guidelines trust deed and applicable laws. In return of these services, fees will be charged against the REIT as well.

REITs in Malaysia are required to pay out 90% of its net profit (distributable portion) to its shareholders in order to be exempted from paying corporate tax at REIT level. Some REITs even have 100% payout ratio in the past.

Ultimately, the goal of a good REIT manager is to achieve higher and sustainable net profit for the REIT so that shareholders could continue to earn passive income from the REIT and enjoy long term capital appreciation!

Note: The REITs mentioned above are meant for illustration purposes only.